Reaching the "Unbanked"
It’s hard to imagine that hundreds of thousands of Angelenos don’t have an ATM card, or a checking account, savings account, retirement account, etc. But it’s true. LA is the #1 city in the country for “unbanked” as they are called.
So how do they function? They hassle with getting other people to cash their checks. And keep their cash at home—not a very safe option. They also go to expensive payday lenders, check cashing places or pawn shops. There are nearly 1400 of these places in L.A. compared to less than 700 banks. Wow... banks outnumbered 2 to 1. And check out this map that shows how much money payday lenders drain out of mostly minority L.A. neighborhoods.
I also didn’t have time to go into the reasons banks don’t go into poor areas. It’s partly because low income areas are underrated. The census under-counts a lot of immigrants and their assets. But when banks have gone in they can be very successful. But they have to do it right, by making connections first with local leaders, churches, schools, sports leagues and clubs. So the word goes out that the bank is a friendly place and can save you money. In these communities word of mouth is very helpful.
And then once a new customer opens an account, the banks have to be sure not to "burn" them with high overdraft fees. Financial literacy is also something smart banks are doing. They are also training and hiring locally. The Wells Fargo in Pacoima is an example of a bank who has done all of this and is thriving.
I also didn’t have time to point out that San Francisco launched a “Bank on San Francisco” campaign in 2006. They were hoping to get 10,000 new accounts. They ended up with 16,000. Banks really can change the “trajectory” of families who are paying too much for basic financial services. Here’s a link if you want more info on the “Bank on L.A.” campaign.
And here’s a link to a really good non-profit group that helps with financial literacy and other issues. It’s the Community Financial Resource Center just south of USC.
(Almost done.) Here’s a very good report by a USC professor, Manuel Pastor, who looks in detail at L.A’s 300,000 unbanked households.